S&P500 and Dow Jones: Earnings and Oil Relief Push Stocks to Records

More than 84% of S&P 500 companies have beaten estimates this quarter, and the market is still punishing the ones that cannot show earnings catching up to the investment.

Weak ADP Takes the Edge Off the Hike Trade

Private payrolls came in at 44,000 against a 75,000 estimate and down from 95,000 in June. Kashkari went out Wednesday and said rates need to go higher. The ADP number says otherwise.

The miss does not settle anything. Kashkari still has the inflation argument, corporate earnings are backing him up and the committee was one vote away from acting last week. But this is not the kind of hiring data that gets the rest of the committee to move with him. If Friday’s payrolls look anything like the ADP number, the September case gets harder to make. If payrolls come in firm, nobody is going to remember Wednesday’s miss.

What to Watch

The rally has earnings, lower oil and a weak ADP print working together. The risk is that the Iran story has not produced a deal and crude can reverse on one headline from Tehran. The S&P 500 is in uncharted territory above 7,700 and the Dow is already stretched above its 50-day moving average. A rally this steep invites a pullback even when the fundamentals support it.

Friday’s payrolls is the test. Soft hiring and weaker wages keep the bid alive. Strong wages hand the hawks the data they need and this rally has to prove it can hold above its breakout levels with the rate trade pushing back.

The market is finding reasons to buy outside of AI and that changes the character of the move. That kind of participation across healthcare, consumer and industrials gives the indexes a wider base than anything the market built in July.

The message from this week is direct. Companies showing AI revenue and margins are getting bought. Companies showing AI spending without a clear return are getting sold.

More Information in our Economic Calendar.